Global energy market volatility intensifies; all parties step up responses

Economic Reference Daily, Reporter Qin Tianhong

Due to the ongoing tension in the Middle East, international energy prices have recently experienced significant fluctuations, gradually affecting the global economy. According to foreign media reports, various parties are intensifying measures to mitigate the impact.

Reuters reported that U.S. crude oil prices surged on March 6, marking the largest weekly increase since the start of the 1983 futures contract — 35.63%. London Brent crude futures rose about 28%, the biggest weekly gain since April 2020. Qatar’s Minister of State for Energy Affairs Saad Sherida al-Kaabi stated that if oil tankers cannot pass through the Strait of Hormuz, crude exports from Gulf countries could halt within days, potentially pushing oil prices to $150 per barrel in the coming weeks.

Currently, Turkey relies heavily on energy imports. Due to rising international oil prices, Turkey’s retail fuel prices have recently increased. According to the latest station prices, local gasoline has risen by 0.92 lira per liter, and diesel by 3.11 lira per liter. To ease the domestic market impact of rising international oil prices, the Turkish government has recently reactivated the fuel tax buffer mechanism. This mechanism stipulates that, amid international oil price increases triggered by the Iran situation, if the prices of certain petroleum products rise, the government will offset up to 75% of the increase by reducing special consumption taxes. This is the first time the mechanism has been reactivated since its cancellation in 2022.

This measure also means Turkey’s government will forgo part of its fiscal revenue. Data shows that in 2025, Turkey’s special consumption tax revenue from oil and natural gas products will reach 522.2 billion lira, accounting for 26.11% of the government’s total special consumption tax revenue of 2 trillion lira. Analysts believe that if the international oil price shock is short-lived, fiscal policy can serve as a “buffer”; but if high oil prices persist, fiscal costs and policy sustainability issues will be amplified.

Similar to Turkey, Australia is a net importer of fuel, relying on imports for about 80% of liquid fuels, with a high structural dependence on imported fuel, making it vulnerable to global supply shortages. Joe Masters, Chief Economist at the Australian Barrenjoy Investment Bank, believes that the most direct impact of Middle East conflicts is reflected in rising oil prices, while already increased shipping costs will further exacerbate inflation. Currently, one of the world’s most important waterways, the Persian Gulf, is turning into a “massive port,” with some ships rerouting via the Suez Canal due to fears of attack. The long detour delays cargo delivery and increases transportation costs. Amid the conflict, some shipping companies have introduced “conflict” and “war risk” surcharges. All these costs will ultimately be passed on to consumers.

Meanwhile, fuel prices at French gas stations have risen noticeably. The average price of 95-octane gasoline increased from €1.72 per liter on February 27 to €1.82 on March 6, nearly a 6% increase; diesel prices rose more sharply, from about €1.72 per liter to €1.98, an increase of approximately 15%. According to France Info, many gas stations across France, including in Paris, have frequently raised prices. Some drivers report that fueling costs have significantly increased; filling a 50-liter tank for a small car now costs about €5 more than before the conflict.

France’s Ministry of Economy and Finance cited data indicating that about 10% of the energy imported into France comes from the Middle East, with overall dependency relatively limited. Analysts note that the main risk France faces now is price volatility rather than supply security. Rising natural gas prices and other factors may significantly increase costs for French businesses, especially in energy-intensive industries such as chemicals, steel, and agriculture.

Data from the Dutch Consumer Union, which monitors fuel prices, shows that on March 8, the recommended retail price for 95-octane gasoline was €2.39 per liter nationwide, and diesel was €2.44 per liter, representing increases of about 5% and 17%, respectively, compared to the end of February.

Alongside rising oil prices, the natural gas market has also experienced sharp fluctuations. On March 6, the Dutch TTF natural gas futures for April closed at €52.8 per megawatt-hour, up from €32 on February 27 — a 65% increase in a week. The rapid rise in natural gas prices is reflected in household energy bills. Overstappen.nl, a Dutch energy comparison website, calculated that for a two-person household, the cost of a fixed-term energy contract in early March is €36 higher than in February. Over the course of a year, this amounts to an extra expenditure of €432.

Additionally, Kuwait Petroleum Corporation announced on March 7 that, due to threats to the safety of ships passing through the Strait of Hormuz, shortages of vessels transporting crude oil and refined products, and other factors, the company has declared a “force majeure” and has begun reducing crude oil production and refining capacity.

Ongoing disruptions in Middle Eastern oil transportation have led Iraq, Qatar, and other major oil-producing countries to announce production cuts. Analysts expect that as regional oil storage capacity becomes increasingly strained, other key producers like the UAE and Saudi Arabia will also be forced to cut output. JPMorgan estimates that if the Strait of Hormuz, a critical global energy route, remains restricted, daily crude oil production in the Middle East could decrease by over 4 million barrels by March 15.

Beyond the energy markets, agricultural transportation has also been affected. The Brazilian National Grain Exporters Association (ANEC) recently stated that current regional conflicts could impact grain trade via the Strait of Hormuz, increasing shipping costs and transportation risks.

In its report, ANEC noted that due to ongoing tensions near the Strait of Hormuz, shipping activities face increased security threats, leading to higher insurance costs and operational expenses. If regional security tensions persist, Brazil’s grain export logistics and trade costs could further rise. Currently, no agreement has been reached among conflict-affected countries to ensure safe passage for grain shipments.

The organization warns that this situation particularly impacts Brazil’s corn trade, as most ports in Iran and Saudi Arabia depend on the Strait of Hormuz route, and these countries are also major destinations for Brazilian grains and by-products. Over the past year, Brazil exported about 14 million tons of grains and by-products to these markets. Brazil is the world’s largest soybean exporter and the second-largest corn exporter, supplying grain products to multiple Middle Eastern countries for a long time.